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Jewish World Review March 7, 2002 / 23 Adar 5762

Deroy Murdock

Deroy Murdock
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Consumer Reports

Bush should scrap the 30% raw materials tax -- THE last thing President Bush should have done in the middle of a nascent economic recovery is raise taxes. Unfortunately, he gave the green light to a 30 percent raw materials tax.

The president accepted the pleas of American steel producers to raise the protectionist wall behind which they hide from international competitors. Specifically, they lobbied for a 40 percent tariff on overseas steel. They got most of what they wanted, with the president agreeing to tariffs between 8 and 30 percent.

The word "tariff" may have a fairly innocuous ring to the untrained ear. After all, who pays tariffs but a bunch of rich, greedy foreigners, right? Wrong. Ultimately, you get the bill.

What the U.S. steel industry really got is a 30 percent raw materials tax. It will raise the prices that American consumers pay for such durables as cars, refrigerators, dishwashers and stoves. Producers can look forward to fatter invoices for such big-ticket items as 18-wheelers, tractors, steel beams and girders. Naturally, such costs will wind up in the price tags for freight, raisin bread, new homes, commercial rents and hotel rooms.

By caving in to the steel industry's demands, President Bush has hurt a new friend whose support America needs in far more important battles. Russia is eager to export even more steel to the U.S. than the $1.5 billion it shipped to America in 2001. This is perfectly reasonable, given that Russian President Vladimir Putin suddenly has become America's new best friend, surpassed only by British Prime Minister Tony Blair and Mexican President Vicente Fox, if that.

What has he done for us lately? President Putin has advanced the War on Terror by accepting U.S. troops as they have operated from Georgia, Tajikistan and Uzbekistan, each a former Soviet socialist republic. Early in the War on Terror, He cranked up Russia's oil wells and helped stabilize crude prices at about $20 per barrel, although they have drifted up lately as Russia has curbed production a bit. Amazingly enough, Putin has objected only mildly to President Bush's decision to ditch the Anti-Ballistic Missile Treaty and test a ballistic missile defense system.

Any one of these policies would have been a generous gift from the Kremlin. All three of them within six months are nothing less than breathtaking. Thus, the new tariffs on Russian steel headed for American ports are not only the quintessence of ingratitude but an ice bucket poured onto a warm and welcome new relationship.

These new taxes "could have a serious impact on the atmosphere of Russian-American relations," the Russian Foreign Ministry declared earlier this week.

So what about the steelworkers who might be hurt by foreign competition? The best bet for them and every American is to liberate the economy so capital can find its most productive and innovative uses. Dispatching the corporate and capital gains taxes to the scrap heap would help restore dynamic economic growth and revive job prospects across the labor market.

How can President Bush finance such a bold proposal? First, he should bundle all of the federal government's giveaways to big business including its sweetheart tariff deals, the $80 billion in annual corporate welfare programs and the 10-year, $167 billion farm subsidy boondoggle now before Congress. Bush should swap all of this for the elimination of the destructive taxes on corporate profits and capital gains.

The World Trade Organization, responding to the understandable outrage of America's trading partners, may veto President Bush's adventure in protectionism. If so, he should give the 30 percent raw materials tax a decent Rose Garden burial. Then he should use his prestige and enormous popularity to junk the corporate and capital gains taxes as matters of national urgency.

And he never should do this sort of thing again. Read my lips, Mr. President: No new taxes!

JWR contributor Deroy Murdock is a New York-based commentator and columnist with the Scripps Howard News Service. Send your comments by clicking here.


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© 2001, Deroy Murdock